Former USDA manager pens business advice book

He is a former CEO of a manufacturing business. He is a Democrat and supporter of President Barack Obama, who appointed Segal chief financial officer of the U.S. Department of Agriculture. And yet he grew so frustrated with the impractical and wasteful way in which government functioned that he resigned the administration.

This month, Segal, 52, and his wife Tracy are enjoying their first summer in their new harbor-front home, an escape from the heat of their year-round residence in Pittsburgh. But sitting in an elegant, screened gazebo that overlooks the idyllic harbor Tuesday morning, Segal is anything but the detached vacationer.

He grows animated talking about the inherent problems with government, and speaks passionately about the lessons he learned in 20 years of operating his own business. Those lessons are gathered in his first book, “From Local to Global: Smart Management Lessons to Grow Your Business.”

Segal conceived of the book not as a dry, textbook aimed at MBA students or fellow CEOs, but rather a collection of simple, practical principles that can be applied to any business, large or small.

Running the USDA through what the president and Agriculture Secretary Tom Vilsack hoped would be a transformative time was much like running a big business, Segal said. Except every opportunity to find efficiencies and make investments that would improve the agency’s work were thwarted by a rigid system.

Vilsack, also a Pittsburgh native and fellow Carnegie Mellon University graduate who had been Iowa’s governor before taking the reins at USDA, wanted someone to help manage the large agency internally.

“How do you help drive change in the department itself?” was the question Segal was tapped to help answer. He was confirmed by the Senate in mid-2009.

Segal has high regard for Obama, whom he first met when Obama was a U.S. senator campaigning for fellow Democrat Bob Casey. As masterful as the president is speaking to large groups, Segal said, “He’s that good in small groups. He’s warm, he’s friendly, sincere, thoughtful, pragmatic. He’s a great husband, he’s a great father.”

But Segal is less effusive about government work.

“In business, you control your own budget. In government, Congress controls your budget,” he said. That means more than Congress setting spending limits. It meant Congress setting priorities that made little sense to Segal.

He gives two examples.

For reasons buried in the distant past, the USDA manages payroll for some 150 government agencies and 500,000 federal employees. The National Financial Center, part of the department, is based in New Orleans, and uses late 1970s computers relying on 10 million lines of code. Rather than jettison the outdated and costly system, thereby saving the government money, Congress maintained a hands-off response.

Segal wanted to take the savings from dropping the outdated system and invest in new software, or perhaps outsource the payroll to a private company. But as a veteran of government told him, “Every dollar saved is a dollar out of some Congressman’s district,” making such a sensible move nearly impossible.

A second example is in how USDA delivers food support systems such as Women, Infants and Children and the Supplemental Nutrition Assistance Program. The federal government matches state administrative costs in a 50/50 arrangement. If one state is more efficient in administration than another, the inefficient state has little incentive to improve, he said, because it gets the same federal money.

“When you hear Republicans say government wastes money, it’s true,” Segal said. But rather than taking a chain saw to the problems, he believes a scalpel is the tool of choice. “A lot of the challenges that government faces,” he said, “reasonable, pragmatic people can come up with solutions for.” Listening to those doing government work is a logical first step, he said.

Before taking the position at USDA, Segal had taken over and built a company that made flexible steel gas lines. The business, Dormont Manufacturing Company, ended up locking up 80 percent of the food-service market and 30 percent of the residential market.

“We invented a product that let restaurant people put their equipment on wheels,” making it easy to move gas-fired stoves, dishwashers and other such appliances so they could be cleaned.

“We had a great business. We were very, very good at what we did,” he said, and Dormont saw $60 million in annual revenue. GE, Whirlpool, Lowes, Home Depot and Sears all were big users of the gas lines. Segal tried to use U.S. suppliers as much as possible, though he notes one irony — his company sold gas lines to a Chinese firm, which installed them in gas grills that were then sold in the U.S.

Segal maintains that all businesses, big and small, can follow such principles as those outlined in the initials “DMAIC” — define, measure, analyze, improve and control. Even the first step is critical: “A lot of times we can’t even agree what the problem is,” he said.

One of the successes at Dormont that illustrates his approach came when the company landed a three-year contract with Sears. Rather than quote a low price in year one, with hikes in the next two years, Segal quoted one price, and promised 5 percent reductions in years two and three.

Once the work was guaranteed, he knew he could find efficiencies, and did — from the small to the large. Instead of getting some material shipped to his plant in cardboard boxes, he switched to reusable plastic totes. And he negotiated a more competitive price on a steel piece, knowing that he would be using the same, specific length.

Though the business was running like a top, Segal sold it.

“We either had to grow much bigger,” he said, or diversify. In addition, his company was named each time a gas appliance was implicated in a fire, even though the culprit was almost always a faulty installation, resulting in the frustration and cost of fighting litigation.

Since stepping out of the USDA in late 2009, he and his wife have been operating a family philanthropic foundation. The couple has two grown daughters.

Segal expects soon to be making the rounds to promote his book, and plans to consult with businesses hoping to grow.